Insurers are allowed to allocate up to 55% of total invested assets in alternative investments. Those investments accounted for 40% of invested assets in 2017, but the number has risen sharply in recent years. In 2012, the proportion was 9%.

Of the 40% recorded in 2017, the largest proportion was in debt investments, where the funds mostly end up as loans to infrastructure and real estate projects, Reuters analysis of insurance asset management product data shows.

In the three years to the end of 2017, insurers’ investment in loans for infrastructure nearly tripled and nearly doubled for real estate.

Higher yields are the main attraction for insurers. Trust products posted average returns of 9.42% as of the end of 2017, while those on top-rated Chinese corporate bonds were around 5%, market data show.

Insurers are finding they can demand higher rates for their loans because of the government crackdown as banks —traditional financiers for trust and asset management schemes—are placed under close regulatory scrutiny and have to dial back, sources said.

The products also have a long maturity—often between five and 10 years —which helps insurers match the duration of their assets to their long-term liabilities, sources and analysts said. Insurers typically have liabilities extending 15 years or more.

Analysts warn that the complex and opaque structure of such products makes it difficult for insurers to see the ultimate borrowers and to then gauge their real exposure— a risk magnified by the long investment periods involved.

“Our first concern is insurers don’t fully understand the risks involved in what they are investing in because those products are not transparent,” said Ms Qian Zhu, a senior credit officer focusing on insurance at Moody’s. “Those products are also causing liquidity problems for insurers.”